Barney Frank Recommends Eliminating Fannie Mae, Freddie Mac

"The remedy here is...as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

After having been one of the key enablers of the Fannie Mae/Freddie Mac debacle in the first place, now Fwank wants to build a new beast. But perhaps the beast is now too big to be broken up and privatized, without causing much distress in the financial markets:

"It's hard for us to imagine" how enough capital could be attracted to replace Fannie and Freddie with stand-alone private companies that would be able to offer low-cost funding for 30-year fixed-rate mortgages, [Standard & Poor's] analysts wrote.

Some analysts have argued that starting from scratch could create more problems than they would solve, in part because Fannie and Freddie own or guarantee around half of the nation's $11 trillion in home mortgages. "Blue sky ideas are great, but they take a long time to happen," said Mahesh Swaminathan, senior mortgage strategist at Credit Suisse, at a conference last month. "When you have $5 trillion of agency mortgages, you can't really orphan them."

There is hope, however:

In a PBS interview on Thursday, Treasury Secretary Timothy Geithner said the legislative process to overhaul Fannie, Freddie and the housing-finance system was unlikely to begin this year. "It's just a complicated thing to get right," he said. "But we are completely supportive and agree completely with the need to make sure that we take a cold, hard look at what the future of those institutions should be in our country."

If "TurboTax Pro" Geithner is right on the timing, and if Republicans can actually gain control of the House in November (not completely unforeseeable), maybe this unsightly purple dinosaur will finally be replaced as The Banking Queen.